Victory Capital Holdings, Inc. Class A Common Stock · NASDAQ:VCTR
Victory Capital Holdings, Inc. Class A Common Stock — Q1 2021 Earnings Presentation
32 slides from Victory Capital Holdings, Inc. Class A Common Stock's earnings presentation, May 7, 2021
Slide 1: First Quarter 2021 Earnings Presentation
First Quarter 2021 Earnings Presentation May 7, 2021
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation may contain “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations, business s
Slide 3: Agenda
Agenda Quarterly Business Overview Organic Growth Outlook First-Quarter 2021 Financial Results Appendix 3
Slide 4: Quarterly Business Overview
Quarterly Business Overview 4
Slide 5: Quarterly Business Overview
Quarterly Business Overview AUM & FLOWS • At March 31, 2021, total AUM of $154.3Bn Up 5% from Dec. 31, 2020 • Record high long-term AUM at quarter end of $151Bn • Long-term gross flows increased for 3rd consecutive quarter • Positive net long-term flows in March 1Q OPERATING • Revenue up 6% from 4
Slide 6: Commitment to Long-Term Investment Performance
Commitment to Long-Term Investment Performance Total Mutual Total Mutual Funds 45 Funds and ETFs with 4- or 5-Star overall ratings 62% and ETFs AUM with 4- or 5-Star overall ratings % of AUM outperforming benchmarks % of strategies outperforming benchmarks 80% 75% 80% 72% 69% 64% 66% 61% 58% 60% 60%
Slide 7: Organic Growth Outlook
Organic Growth Outlook 7
Slide 8: Organic Growth Outlook - Opportunities
Organic Growth Outlook - Opportunities PRODUCTS/STRATEGIES OPEN CAPACITY Recent Acquisitions ~$15 Billion THB Asset Management Exceptional Investment Performance Alderwood Alternative Investments N/A Products for Current Interest Rate Environment ~$50 Billion Victory Floating Rate Fund – RSFYX
Slide 9: Organic Growth Opportunity – By Asset Class & Franchise
Organic Growth Opportunity – By Asset Class & Franchise INTERNATIONAL SMALL CAP • Trivalent • THB GLOBAL • RS • THB EMERGING MARKETS • Sophus U.S. MICRO-, SMALL-, SMID-, AND MID-CAP • Sycamore • Integrity • RS • THB INVESTMENT GRADE CONVERTIBLE BONDS • INCORE ALTERNATIVE INCOME • Solutions / ETFs AL
Slide 10: Organic Growth Outlook – Won-Not-Yet-Funded / Pipeline
Organic Growth Outlook – Won-Not-Yet-Funded / Pipeline WNF / PIPELINE ACROSS NUMEROUS FRANCHISES AND ASSET CLASSES • Fixed Income • U.S. Small-Cap Value • U.S. Mid-Cap Value • Solutions • Global • Emerging Markets DIVERSIFIED BY CLIENT TYPE • Sovereign Wealth Funds • Insurance Companies • City/State
Slide 11: Direct Investor Business and USAA Investments Franchise
Direct Investor Business and USAA® Investments Franchise DIGITAL • 56 mutual funds are now available in digital marketplace MARKETPLACE • Launched digital portfolio planner • Fixed income SMAs now available • Referral agreement with USAA is producing tangible results o Approximately 125K new account
Slide 12: Increasing Shelf Space – USAA Investments Franchise
Increasing Shelf Space – USAA Investments Franchise NEW OR EXPANDED RELATIONSHIPS FORGED SINCE JULY 2019 12 All product names, logos, and brands are property of their respective owners
Slide 13: First-Quarter 2021 Financial Results
First-Quarter 2021 Financial Results 13
Slide 14: First-Quarter 2021 Financial Results
First-Quarter 2021 Financial Results FIRST- • $213MM revenue QUARTER o Up 6% from 4Q 2020 FINANCIAL • GAAP operating margin of 42% o 330bp expansion from 4Q 2020 RESULTS • Adjusted EBITDA margin was 50.2% • Record Adjusted EBITDA $106.8 million • Record GAAP Net Income of $65.2 million • Record GAAP
Slide 15: Assets Under Management
Assets Under Management • Total AUM of $154.3Bn at March 31, 2021 $Bn o Up 5% from Dec. 31, 2020 ($mm) • Diversified distribution Retail Institutional Direct o Retail o Institutional $154.3 $147.2 o Direct $129.1 $132.7 2Q20 3Q20 4Q20 1Q21 Assets under management are as of the end of the respective
Slide 16: Long-Term Asset Flows
Long-Term Asset Flows • Gross LT sales of $6.7Bn $Bn o 18% increase in Q-o-Q Sales Gross LT Sales Gross LT Redemptions 3/31/18 • Multiple franchises/strategies and ($mm) $6.7 products generated long-term net $5.2 $5.7 $5.1 inflows in 1Q including: o THB o INCORE o Trivalent o Sycamore o VictoryShare
Slide 17: Revenues
Revenues ($mm) • 1Q 2021 revenue $213MM 3/31/18 $MM 9/30/17 o Up 6% vs 4Q 2020 $212.9 • Average fee rate realization increased $200.4 for the second consecutive quarter $105.0 $188.7 $181.9 o Highest in 5 quarters Operating Metrics 2Q20 3Q20 4Q20 1Q21 Average AUM ($Bn) $128.9 $133.1 $139.6 $151.1 Av
Slide 18: Expenses
Expenses • 1Q 2021 total expenses increased $2.3 $MM 10 million vs 4Q 2020 $127.8 $130.1 90 $122.7 o Driven primarily by higher variable $115.9 80 expenses and seasonally higher expenses related to benefits, offset 70 by lower acquisition-related 60 expenses 50 o Non-cash accounting adjustment of bo
Slide 19: Non-GAAP Metrics
Non-GAAP Metrics ($mm) 3/31/18 9/30/17 • 1Q 2021 Adjusted Net Income $MM except per share data (ANI) with tax benefit of $1.13 per ANI Tax Benefit ANI with tax benefit per diluted share diluted share $1.20 $100.0 $1.13 o Up 6% from 4Q 2020 $1.07 • 1Q 2021 ANI with tax benefit of $1.00 $83.6 $1.00 $8
Slide 20: Capital Management
Capital Management Interest Expense and Other ($mm) 3/31/18 Debt ($MM) Financing Costs 9/30/17 ($MM) Selected Balance Sheet Items ($MM) 3/31/2021 $9.7 $881 $837 Cash / Cash Equivalents $30 $788 $8.2 $738 $7.7 Debt (2Q to-date, further reduced to $711MM) $738 $6.8 Stockholders' Equity $765 Diluted Sh
Slide 21: Appendix
Appendix 21
Slide 22: Ongoing and Future Cash-Tax Benefits
Ongoing and Future Cash-Tax Benefits Section 338(h)(10) Election • Stepped up cost basis of acquired indefinite lived intangible assets is deductible for corporate income tax purposes over 15 years o $1.4 billion in total future tax amortization o $340 million in future cash tax savings, assuming 25
Slide 23: Notes and Disclosures
Notes and Disclosures Information Regarding Non-GAAP Financial Measures Victory Capital uses non-GAAP financial measures referred to as Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the Company. These measures eliminate the impact of one-time acquisition, restruct
Slide 24: Notes and Disclosures
Notes and Disclosures Information Regarding Non-GAAP Financial Measures (cont.) Adjusted Net Income Adjustments made to GAAP Net Income to calculate Adjusted Net Income, as applicable, are: • Adding back other business taxes; • Adding back amortization expense on acquisition-related intangible asset
Slide 25: Consolidated Reconciliations of Adjusted EBITDA
Consolidated Reconciliations of Adjusted EBITDA For the three months ended, (in thousands) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 GAAP Net income $ 57,166 $ 44,720 $ 55,741 $ 54,895 $ 65,202 GAAP Income tax expense (16,823) (14,487) (17,027) (17,681) (17,662) GAAP income before taxes 73,
Slide 26: Consolidated Reconciliations of Adjusted Net Income
Consolidated Reconciliations of Adjusted Net Income For the three months ended, (in thousands, except per-share data) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 GAAP Net Income $ 57,166 $ 44,720 $ 55,741 $ 54,895 $ 65,202 Other business taxes (3,296) 219 256 265 374 GAAP amortization of acqu
Slide 27: Detailed Reconciliation of 1Q21 Adjusted Net Income
Detailed Reconciliation of 1Q21 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangi
Slide 28: Detailed Reconciliation of 4Q20 Adjusted Net Income
Detailed Reconciliation of 4Q20 Adjusted Net Income GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangibles Compensation Exit Costs Costs Adjustments Basis
Slide 29: Detailed Reconciliation of 3Q20 Adjusted Net Income
Detailed Reconciliation of 3Q20 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization of Tax Benefit Other Acquisition- Acquisition, Debt of Goodwill U.S. GAAP Business Related Stock-Based Restructuring Issuance Total Non-GAAP and Acquired Basis Taxes Intangibles
Slide 30: Detailed Reconciliation of 2Q20 Adjusted Net Income
Detailed Reconciliation of 2Q20 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization of Tax Benefit Other Acquisition- Acquisition, Debt of Goodwill U.S. GAAP Business Related Stock-Based Restructuring Issuance Total Non-GAAP and Acquired Basis Taxes Intangibles
Slide 31: Detailed Reconciliation of 1Q20 Adjusted Net Income
Detailed Reconciliation of 1Q20 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangi
Slide 32: Notes and Disclosures
Notes and Disclosures Investing involves risk, including the potential loss of principal. There are no assurances that any fund will achieve its stated objective. All data in this presentation, unless otherwise noted, is as of March 31, 2021. Past performance does not guarantee future results. A fun
Victory Capital Holdings — Q1 2021 Earnings Presentation on 6ix